The joint venture agreements have already been signed but the firms say, they are subject to further closing conditions and regulatory approvals.

The joint venture companies intend to build a plant to make BDO and one to make PolyTHF. These are planned to go on stream in 2015. The annual capacities of the plants located in Korla will be 100,000 metric tons of BDO and 50,000 metric tons of PolyTHF.

BASF declined to specify the investment levels or equity structure of the joint venture but confirmed that a condition of the deal was that the plant was situated in Korla, rather than at its other sites in China. Makor has two existing BDO plants at Korla and has total BDO capacity in China of 160,000 metric tons. Markor has invested about RMB 5 billion (about 600 million euros) in the Korla Chemical Park, before this announcement.

"We are aiming to expand our local production capacity in order to support our customers in the Chinese market," said Guido Voit, senior vice president, responsible for the region Asia Pacific within BASF's Intermediates division.

"Thanks to our integrated value chain, we can achieve great synergies, enabling us to serve our customers better. We look forward to working with BASF to further expand our joint business in China," said He Xiaorong, vice president of Markor Group.

According to China's Chemical Industry: The new forces driving change a report from KPMG, a business consultancy, China accounted for 20 percent of polyurethane demand in 2011. Research China puts the growth rate for polyurethane at around 10 percent year on year.

PolyTHF is primarily used to make elastic spandex fibers for a large variety of textiles, including underwear, outerwear, sportswear and swimsuits. It also serves as a chemical building block for thermoplastic polyurethanes (TPU) used to make hoses, films and cable sheathing.

Other applications include thermoplastic polyetheresters, polyetheramides and cast polyurethane elastomers for the production of for example wheels for skateboards and inline skates. BDO is used in the manufacturing of technical plastics, polyurethanes, solvents, electronic chemicals and elastic fibers.